Regulatory Competition, Choice of Forum, and Delaware’s Stake in Corporate Law (Part 1) (Part 2)
As Delaware corporate law confronts the twenty-first-century global economy, the state’s legislators and jurists are becoming sensitive to increased threats to the law’s sustained preeminence. The increased presence offederal laws and regulations in areas of corporate governance traditionally allocated to the states has been widely noted. The growth of federal corporate law standards may be undermining Delaware’s confidence in the sustained prosperity of its chartering business-which has been a vital source of revenues and prestige for Delaware, its equity courts, and especially its corporate bar. The Delaware Court of Chancery appears to be concerned about the emigration of corporate law cases to other states’ courtrooms, and is exercising its discretionary jurisdiction more expansively in parallel proceedings to deny defendants’ motions to stay. There are even more aggressive measures that Delaware companies and lawmakers could take to restrict Delaware shareholders’choice offorum and keep these cases in Delaware. But Delaware has much to lose from trying to gain monopoly power over the adjudication of its corporate law. Indeed, in a system where corporate managers (or founders/controlling shareholders) select the state of incorporation-and hence effectuate the choice of Delaware corporate law-it is likely that allowing shareholder-plaintiffs freedom in forum selection has a salutary, modulating effect on Delaware corporate law. The ability of Delaware shareholder-plaintiffs to litigate elsewhere most likely plays a key role in preventing Delaware corporate law from becoming hostage to corporate defendants’ interests.